General Electric’s New Multi-Year Stock Highs (GE)

General Electric Co. (GE-NYSE) is actually putting in new multi-year highs today.  All of a sudden, mega-caps are back.  This is just a couple months after more than a few ‘overly-hyperactive activists’ were wrongly questioning the value of the conglomerate and even questioning the leadership of Jeff Immelt.

This is the problem of merely focusing on short periods of time because shares are actually up quite a lot since the post-2001 and 2002 lows, actually by more than 75%.  What happened for the year and a half after September 11, 2001 is not at all the fault of General Electric nor of any other conglomerate.  We were in a recession.   On a dividend-adjusted basis it looks like shares are now up almost 90% from the lows.  I was on CNBC earlier this year critical of Citigroup’s analysis showing that a break-up of GE would be good, mainly because my thesis is that breaking up the decades of work that it has taken to get here puts the company at risk when the economy is slowing and that breaking up is a bull market strategy only.

The focus of the complaints were based upon the fact that GE’s shares were considered dead money for most of the last two years.  The problem with focusing on a time period this short is that almost any company out there will have periods like that.  What’s sad is that this was not based on any earnings misses and wasn’t based on the fact that the company was blowing it across the divisions.  It was the fact that Wall Street was only willing to pay so much for a conglomerate and Mega-Cap stocks were not in demand and were even seeing P/E compression.  In fact, earnings have been growing by what the company forecast and after the law of large numbers comes into play it gets harder and harder to deliver significant upside.  Even the dividend, now at $0.28 per quarter, has grown virtually every year and was at $0.16 per share when Immelt took the helm. 

This recent stock move should put to bed any questions of Immelt’s leadership, which is why he was noted by yours truly as one of the most entrenched corporate leaders out there.  Based upon the $38.70 stock price GE has a $398 Billion market cap and it is no secret that it takes a bit more money in and out of this stock to move the bar compared to mid-cap stocks.  The previous high for the year was $38.49, and the 52-week low was $32.06.

Jon C. Ogg
June 19, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.